Management services provided to pension funds are VAT exempt

The Court of Justice of the European Union has ruled that management services provided to pension funds are VAT exempt. Plesner Law Firm conducted the case on behalf of ATP PensionsService and PensionDanmark.

Impact of the case

According to the Danish Ministry of Taxation, management services provided to pension funds were liable to VAT and the judgment has resulted in the overruling of Danish case law. It means that in future management services are to be provided without adding VAT which is of great importance to pension funds which were not allowed to deduct VAT from their costs.

But the case will also have a major retroactive impact as pension funds and management companies are now entitled to repayments of the wrongfully charged and paid VAT. The amounts could run into millions.

As a result we recommend that pension funds and management companies look into whether they are entitled to a repayment of VAT.

Qualifying pension funds and management services

The management services of pension funds are covered by the VAT exemption if:

• They are funded by the persons to whom the retirement benefit is to be paid
• The funds are invested using a risk-spreading principle
• The pension customers bear the investment risk.

Banks

The judgment can have an impact on the general interpretation of when the administration of special investment funds is VAT exempt and we expect that the judgment will be important to banks as well.

Further information

Please contact Tom Kári Kristjánsson, Partner, Attorney-at-Law, (+45 2999 3045) or Mette Juul, VAT Specialist, Assistant Attorney, (+45 2999 3088) for further information.